How to make sure annual billing is right for your SaaS company

Many SaaS businesses are offering annual billing with generally 10-20% discounts. It has benefits and downsides, but is it adapted to your SaaS company?

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Many SaaS businesses are offering annual billing with generally 10-20% discounts. It allows your business to boost your cash flow immediately and reduce churn. Seems like a no-brainer!

But it's more complicated than that. There are actually quite a number of situations where it's best not to offer annual billing.

Flexible pricing. Annual billing is a harder decision for customers because it costs more. For that reason, you need a billing experience as smooth as possible. If you have flexible pricing with a number of licenses or users, chances are high that your billing experience isn't frictionless.

Unachieved desired outcome. Customers may have initial success with your product and decide to pay annually. But a few months later they are not satisfied anymore. Maybe sales or marketing promised things that haven't been delivered. Maybe an important feature became slow or buggy. Make sure to stay on top of these issues and avoid bad-fit customers.

Dissatisfied from their relationship with your company. Customers may be very satisfied with the product itself, but the relationship with your business isn't optimal. It can come from various sources like untargeted messages, lack of transparency, poor support response time, etc. Relationships with your customers must be nurtured if you want to offer annual billing.

If you are an early-stage startup or haven't achieved product/market fit yet, I would highly recommend you hold off annual billing. If you have achieved product/market fit and your pricing is simple then go for annual plans. But remember not to lose touch with annual customers or you will regret it big time!